WASHINGTON, DC ( release) U.S. Senator Charles E. Schumer revealed that China’s trade policies and currency manipulation have cost New York State over 160,000 jobs and millions across the country, and put New York manufacturers at a severe competitive disadvantage. According to a report issued by the Economic Policy Institute, the New York City metropolitan region has lost an estimated 111,638 jobs due to Chinese trade practices and currency manipulation in the last decade, including approximately 61,398 jobs in New York City, 23,246 jobs on Long Island, and 26,993 in the northern suburbs. Schumer, who introduced legislation with colleagues on both sides of the aisle, is pushing for quick passage in order to stop China’s unfair trade practices that are hurting New York companies. Standing with Daniel Lax, one of the owners of Autronic Plastics, Clear-Vu, and Clear-Vu Lighting in Westbury, Long Island, Schumer said his bill would ratchet up the pressure with a series of increasingly serious consequences, including possible imposition of additional duties on imports, if China failed to properly value its currency.
“China has used their currency to rig the game against New York manufacturers, killing jobs here and across the country,” said Schumer. “Enough is enough, it’s time that we level the playing field and give New York businesses a chance to compete, fair and square. This strong bipartisan legislation is a clear, unwavering message from both parties to China’s leaders- the jig is up, it’s time to stop gaming the system or face severe consequences. China’s history of half-truths and broken promises on currency makes passing this legislation an economic imperative. I hope both parties will come together to pass this bill this week.”
In the past few years, Chinese companies have bid on New York projects and used workers who were being paid only a few dollars an hour, and sometimes even less, for the same projects companies were bidding on. By doing this, their bids came in much lower compared to other American companies. By doing the right thing and paying workers a decent wage, New York manufacturers are losing out to Chinese companies on huge projects.
Joining Schumer today was Daniel Lax, part owner of a father and son manufacturing company in Westbury, Long Island. Daniel’s company, Autronic Plastics, is finding it much more difficult to compete in manufacturing emergency exit signs because Chinese companies are selling the complete fixture for less than it costs Autronic just to buy the circuit board that goes inside of the product.
China’s ongoing undervaluation of the yuan continues to cause severe economic disruptions and imbalances globally and is taking a huge toll on manufacturers and workers across New York and throughout the country. Moreover, failure to address China’s currency manipulation has emboldened China to countenance other market-distorting policies, including discriminatory indigenous innovation policies and inadequate protection of intellectual property, that benefit companies in China at the expense of U.S. companies and workers.
Over the past decade, the nation has lost approximately 6 million manufacturing jobs and seen 57,000 manufacturing plants shut down forever. According to a new Economic Policy Institute study, 1.9 million of those manufacturing jobs nationwide were lost or displaced as a result of increased trade with China and the Chinese government’s manipulation of its currency. In New York State, 161,414 total jobs were lost or displaced, including 61,398 jobs in New York City, 23,246 jobs on Long Island, and 26,993 in the northern suburbs, for a total of 111,638 in the New York City metropolitan area. Moreover, since China joined the World Trade Organization in 2001, our trade deficit with the country has increased from $83 billion to a record of $273 billion in 2010. Addressing currency manipulation would yield significant benefits to the U.S. economy. According to the study, addressing China’s currency manipulation would positively impact the U.S. economy over the next 18 to 24 months by creating a 1.9% increase in GDP [$285.7 billion], $71.4 million in annual deficit reduction, and 2.25 million American jobs.
The Currency Exchange Rate Oversight Reform Act of 2011 is intended to reform and enhance oversight of currency exchange rates, leveling the playing field for New York manufactures. Specifically, the legislation:
Improves Oversight of Currency Exchange Rates. Under current law, Treasury is required to identify countries that manipulate their currency for purposes of gaining an unfair competitive trade advantage. In recent years, Treasury has found that certain countries’ currencies were undervalued. However, based on its interpretation of the law’s legal standard for a finding of “manipulation,” Treasury has refused to cite such countries as currency manipulators. The bill repeals the currency provisions in current law and replaces them with a new framework, based on objective criteria, which will require Treasury to identify misaligned currencies and require action by the administration if countries fail to correct the misalignment.
Clarifies Countervailing Duty Law Can Address Currency Undervaluation. Under existing trade laws, if the Commerce Department and the International Trade Commission find that subsidized imports, like glass, are causing economic harm to American manufacturers and workers, the administration must impose duties on those imports to offset (“countervail”) the benefit conferred on foreign producers and exporters by the government subsidies. Commerce already has authority under U.S. law to investigate whether currency undervaluation by a government provides a countervailable subsidy, although it has failed to do so despite repeated requests to investigate from a wide range of U.S. industries. The bill specifies the applicable investigation initiation standard, which will require Commerce to investigate whether currency undervaluation by a government provides a countervailable subsidy if a U.S. industry requests investigation and provides proper documentation.
Includes WTO-Consistent, Key Provision from Brown-Snowe Currency Reform for Fair Trade Act (S.328) and House-passed Currency Legislation. In previous countervailing duty investigations, Commerce has refused to find an export subsidy if the subsidy is not limited exclusively to circumstances of export (i.e., when non-exporters also may benefit). The bill precludes Commerce from imposing this bright-line rule, and clarifies that Commerce may not refuse to investigate a subsidy allegation based on the single fact that a subsidy is available in circumstances in addition to export. This clarification is supported by dispute settlement rulings of the World Trade Organization’s Appellate Body (e.g., in the case involving taxation of foreign sales corporations) and is the key element of the Brown-Snowe currency bill and the currency bill that passed the House (H.R.2378) in September 2010 with overwhelming bipartisan support.
Establishes New Objective Criteria to Identify Misaligned Currencies. The legislation requires Treasury to develop a biannual report to Congress that identifies two categories of currencies: (1) a general category of “fundamentally misaligned currencies” based on observed objective criteria and (2) a select category of “fundamentally misaligned currencies for priority action” that reflects misaligned currencies caused by clear policy actions by the relevant government.
Requires New Consultations. The legislation requires Treasury to engage in immediate consultations with all countries cited in the report. For “priority” currencies, Treasury would seek advice from the International Monetary Fund (IMF) as well as key trading partners.
Triggers Tough Consequences. For “priority” currencies, important consequences are triggered unless a country adopts policies to eliminate the misalignment.
Immediately upon designation of a “priority” currency, the administration must:
Oppose any IMF governance changes that benefit a country whose currency is designated for priority action.
Consider designation of a country’s currency as a “priority” currency when determining whether to grant the country “market economy” status for purpose of U.S. antidumping law.
After 90 days of failure to adopt appropriate policies, the administration must:
Reflect currency undervaluation in dumping calculations for products produced or manufactured in the designated country.
Forbid federal procurement of goods and services from the designated country unless that country is a member of the WTO Government Procurement Agreement (“GPA”).
Request the IMF to engage the designated country in special consultations over its misaligned currency.
Forbid Overseas Private Investment Corporation (OPIC) financing or insurance for projects in the designated country.
Oppose new multilateral bank financing for projects in the designated country.
After 360 days of failure to adopt appropriate policies, the administration must:
Require the U.S. Trade Representative to request dispute settlement consultations in the World Trade Organization with the government responsible for the currency.
Require the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.
Limits Presidential Waiver. The President could initially waive the consequences that take effect after the first 90 days if such action would harm national security or the vital economic interest of the United States. However, the President must explain to the Congress in writing how the adverse impact of taking an action would be greater than the potential benefits of such action. Any subsequent economic waiver would require the President to explain how the adverse impact of taking an action would be substantially out of proportion to the benefits of such action. Furthermore, any Member of Congress may thereafter introduce a joint resolution of disapproval concerning the President’s waiver. Should the disapproval resolution be approved, the President may veto it, and the Congress would have the opportunity to override the veto.
Establishes New Consultative Body. The bill would create a new body with which Treasury must consult during the development of its report. Of the nine members, one would be selected by the President and the remainder by the Chairmen and Ranking Members of the Senate Banking and Finance Committees, as well and the Financial Services and House Ways and Means Committees. The members must have demonstrated expertise in finance, economics, or currency exchange.